The Recent Spree of Mergers and Acquisitions in India

Context: Acquisition of Future Group’s Retial assets will help billionaire Mukesh Ambani-controlled RIL to expand its fast-growing retail business and bolster online retail capabilities.

  • The Mergers, amalgamations and acquisitions in India are regulated by the Competition Commission of India (CCI).
  • CCI is the statutory authority responsible for reviewing combinations and assessing whether or not they cause or are likely to cause an appreciable adverse effect on competition within the relevant market(s) in India.

Analysis

  • CCI is watchdog of market competition. Certain Checks are undertaken before any acquisition is approved by it.

    1. if it limits the number of suppliers available to customer in this market in India;

    2. if it reduces the intensity of innovation in the technology;

    3. If the substantial market position of the Parties in the market will reduce or eliminate the competitive pressure that would prevail in the absence of Proposed Combination;

    4. If it reduces the bargaining power that the customers enjoyed on account of fair competition in market.

    5. if it increases the cost of the entrants and rivals to compete.

Competition Commission of India

  • The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007:
  • Prohibits anti-competitive agreements;
  • Abuse of dominant position by enterprises and;
  • Regulates combinations (acquisition, acquiring of control and M&A),
  • Which causes or likely to cause an appreciable adverse effect on competition within India.
  • The objectives of the Act are sought to be achieved through the Competition Commission of India (CCI), a quasi-judicial body.
  • CCI consists of a Chairperson and 6 Members appointed by the Central Government.

Objective of Competition Commission of India (CCI)

  • Remove negative competitive practices
  • Promote sustainable market competition
  • Protect the rights of the consumer
  • Protect the freedom of trade in Indian markets
  • Protect the rights of small traders from the large traders to ensure their survival
  • Advice and give suggestions to Competition Appellate Tribunal
  • Run informative campaigns and create public awareness about fair competitive practices.
  • The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law.
  • It also undertakes competition advocacy, create public awareness and impart training on competition issues.
  • The Competition Appellate Tribunal was formed in 2009 and is a fully empowered body by the Constitution of India. The final appeal after this tribunal can be made in the Supreme Court of India.

Who can approach CCI?

  • Recently the National Company Law Appellate Tribunal, in the appeal case Samir Agarwal v. Competition Commission, ruled that, a ‘person’ must necessarily be one “who has suffered an invasion of their legal rights as a consumer or as a beneficiary of healthy competitive practices”. (Principle of LOCUS STANDI applies- Locus Standi can be simplified as the capacity to take action by himself or appear in court, only by an individual to seek justice for violation of his own rights.)

Herfindahl– Hirschman Index (HHI)

  • It can be used for measuring the level of competition or market concentration in a relevant market.

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